Matters:

On September 23, 2024, the company issued an announcement to acquire 75.2% of Global ResourcesInternational (GRI) shares in cash at a transaction price of approximately $0.12 billion.

Commentary:

GRI is deeply involved in the US market and has a perfect global production capacity layout. GRI is a global medical consumables and industrial protection company headquartered in Georgia, USA. Its business covers the United States (about 70%), Europe (about 20%), and Asia (about 10%). Its main products include medical consumables (55%), industrial protective products (20%), and other contract processing (25%). GRI has production bases all over the world, with a total production area of over 80,000 square meters; it also has sales and logistics layouts in the US and Europe, and a total storage area of over 70,000 square meters. In 2023, GRI achieved revenue of $0.15 billion and net profit of $8.94 million, corresponding to a net interest rate of 5.9%.

The synergy effects of mergers and acquisitions are expected to be seen, and one-stop solutions for global medical consumables are actively being deployed. 1) Production capacity:

GRI has multiple production and logistics bases for medical consumables and industrial protective products in overseas countries such as the United States, Vietnam, and Dominica. In the future, it is expected that production capacity collaboration will be formed to strengthen supply capacity in overseas markets. 2) Localized operation: GRI has a complete operating system and market foundation in the US market. The core management team has more than 30 years of experience, which is expected to improve the ability of stable healthcare to operate locally in the US market. 3) Product: GRI has industry-leading R&D, production and processing capabilities for water-soluble, degradable protective materials, and may further enrich the coverage of robust medical injection molding products. Overall, the acquisition is in line with the development strategy of a steady medical “one-stop solution for global medical consumables” and is expected to further strengthen the company's overseas production capacity, sales channels and localized operation capabilities.

Investment advice: The impact of the medical business base is gradually weakening, and revenue is expected to continue to grow healthily through epitaxial mergers and acquisitions. The consumer goods business focuses on creating explosive products, working together offline and offline, and the profit quality is high. Considering the impact of GRI consolidation, we raised our profit forecast. The company's net profit for 24-26 is estimated to be 0.83/1.05/1.23 billion yuan (previous value was 0.8/0.93/1.1 billion yuan), corresponding PE 17/13/11 times. Referring to the absolute valuation method, a target price of 41.3 yuan was given, and the “strong recommendation” rating was maintained.

Risk warning: The recovery of the consumer sector fell short of expectations, and the recovery in consumer confidence was blocked in the macro environment, etc.